Photo: MTI

Karacsony: Capital to suspend ‘financing’ of central government

The Budapest metropolitan council is suspending its contributions to central government financing in the next few months, Gergely Karacsony, the mayor of Budapest, said on Wednesday.

The Budapest administration disputes the legality of part of the 58 billion forint (EUR 154m) per annum solidarity tax, Karacsony said, presenting the capital’s “survival programme” at a press conference, and it is filing a lawsuit in the administrative court to reduce the amount.

The part of the tax that they consider legal will be paid, he said, adding that the rest “we can’t pay and don’t want to pay”. The municipality plans to pay 33 billion forints instead of 58 billion, the mayor told MTI’s correspondent.

Under the Fundamental Law, municipalities’ own revenues can’t be diverted, and the 58 billion forint tax is 25 billion more than the government funding Budapest receives to operate public services, he said. “The government wants to claim 25 billion in taxes unlawfully,” he said.

The finance ministry was remiss in its constitutional obligation when it failed to curb the tax to the amount of funding received, he said.

Regarding a possible execution of the taxes, Karacsony said “we shall have no money in our accounts, and so there will be nothing to execute.”

Recent crises and government austerity have made the municipality’s situation very difficult, he said. “We won’t be able to get through the year without an action plan, and the funding of public utilities may be in danger,” he said.

Karacsony noted he had asked deputy mayor Ambrus Kiss to prepare an action plan based on two principles: that city services cannot be harmed and “there is no situation in which we would risk the wages of the 27,000 people employed by the municipality.”

Certain points of the action plan will be tabled at the City Assembly next week, he said.

Extraordinary measures will include strict liquidity management in city-run institutions and the re-allocation of 15 billion forints for Q4 operations, he said. The Budapest Transport Company (BKK) will take out a 24 billion forint short-term loan to ensure operations, he said.

Developments will be rescheduled so they will be payable in the fourth quarter, he said. This may impact the investments regarding the reconstruction of the Chain Bridge, he warned.

They will also pursue outstanding payments from the government, which by law should have been paid “long ago”, he said.

Budapest received no compensation for paying increased utility prices when the price caps were phased out for public players, which Karacsony insisted the municipality was “entitled to”. The government was also to contribute 6 billion forints to the reconstruction of the Chain Bridge, he added.

At the same time, the city is determined to continue with its energy saving scheme, he said.

Government tardiness meant that by now, “the capital is funding the government”, in steps such as buying new trolley buses for 11 billion, which should be funded from EU resources, he said.

“We would like to prod the government into action on that matter too,” he said.

He also called on the government to contribute to a 16.6 billion loan for developments in Budapest.

The city’s action plan also includes launching a procedure with the tax authority to defer VAT, tax and contribution payments, he said. The municipality is hoping to “push some of our problems back until September”, when corporate taxes will ease the situation, he said.

Regarding the city’s performance, he said his tenure’s first year had been taken up by the coronavirus pandemic, “where the municipality performed extremely well”. “The Covid pandemic impacted Budapest the least and city-run care facilities saw the fewest fatalities,” he said.

The city has also set up Budapest Kozmuvek in an effort to optimise city-run companies, which he said had saved billions of forints. The city’s energy policy has also saved 29 billion forints, compared with energy prices at the end of last year, he added.

At the same time, “there is a crisis we can’t and won’t solve. It is a domestic political crisis, and consists of the government’s commitment to an anti-Budapest policy,” he said.

The capital paid 5 billion forints in solidarity tax in 2018, which has grown to 58 billion by 2023, he said. At the same time, Budapest received 20 billion in budgetary funding in 2018, which has “turned into minus 25 billion by 2023,” he said.

Zsolt Wintermantel, group leader of ruling Fidesz in the Budapest city assembly, said Karacsony was “trying to recover from the financial situation he himself had created by trying to make others do his work for him”.

He said Karacsony “not wanting to fulfil the city’s tax obligations” and his decision to take out a loan “isn’t city management”.

Wintermantel said former mayor Istvan Tarlos had handed over the city leadership with 214.5 billion forints in reserve. Also, Karacsony’s administration has collected over 200 billion forints more in business tax revenue than the previous leadership had in its last four years, he added.

He said Karacsony was “working tirelessly to do the bidding of Democratic Coalition leader Ferenc Gyurcsany instead of working to make things better for Budapest”.

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